Supply Chain Management Advancements in SCM

Transcription

1 Supply Chain Management Advancements in SCM Dr Mariusz Maciejczak

2 Business-to to-business e-commercee An example: Eurotrans - an Internet-based European freight exchange Trucking companies Manufacturing companies Post offers of transport Post requests for capacity transportation capacity Consult requests for Set up private exchanges transportation Access to Eurotrans with partner trucking through terminals in companies service stations Additional community- building services: weather, maps, e etc.

3 From Internal Silos to Networked Ecosystems Business Dimension Functional Excellence Integrated Supply Chain Adaptive Supply Chains MINDSET Integration Silo Enterprise Extended Enterprise Organization Departmental Centralized Collaborative Performance Cost Cost & Service Profit & Productivity EXECUTION Decision Functional Process-Focused Technology Point Solution ERP/Bolt-On Time Focus Months to Weeks Weeks to Days Event-Based, Agent-Assisted Interdependent, Web-Connected Real-Time

4 RFID Technology Allows Goods to Be Identified and Monitored Via a Wireless Tag Device: a tag / label with identification that is read electronically Minimal issues with orientation and obscurity compared to barcodes Tags can be electronic chips Have storage capabilities and power sources that provide versatility System: device + reader/writer + controller Device tag / label Reader/writer to communicate with device Controller manages data interface with computer systems In short, RFID is like a bar code that can talk

5 RFID: A $15B to $25B Market by 2015 Applications Tracking, Tracing, Inventory Management Anti-Counterfeiting Safety, Security Numerous others Market players Alien Technology Checkpoint Matrics Intermec As with all new technologies, there are issues, barriers, and adoption challenges Common standard Tag cost System integration Privacy Readability

6 Experts Predict Cost per Tag Will Be as Low as 5 Within 18 Months (in 2001: $30 per tag) Gillette ordered 500 million tags this year P&G thinks RFID can cut its inventory levels almost in half Wal-Mart have put its suppliers on notice, using RFID will become a requirement to remain a supplier No other technology in the last 20 years has had as much potential to impact the economy s trillion-dollar inventory levels as RFID!

7 There are Numerous Applications of RFID Across the Supply Chain Product Lifecycle Management Item Level Inventory Tracking Inventory Reduction Security Automatic Receiving Shrinkage In Store Inventory Intelligent Shelf Last 50 yards Automatic Checkout Product Related On Sell Raw Raw Material Manufacturer Manufacturer Finished Goods // Warehouse Distribution Retailer Waste Disposal Improved Production Planning Asset Tracking Plant Maintenance Proof of Delivery Fleet Maintenance & Repairs Vendor Managed Inventory In Store Reactive Marketing In Store Availability Characteristics of Adaptive Supply Chain Execution Real Time Proactive Intelligent Collaborative Visible Event Driven Responsive Coordinated Closed-Loop

8 RFID in practice

9 Introduction RFID in DHL

10 DHL general requirements/wishes of RFID. General: World compliant. Standards based. Tag thermal printable labels: Write capable. Low cost. Simultaneous multiple read capability: Rapid data acquisition. High reliability and repeatability within proximity of 100%. Moderate cost/complex antenna systems. Reliable coverage limited to within a maximum of 3 to 4 metres.

11 DHL Express Objectives for RFID Performance - lowering operational costs: Reduce or eliminate the need for bar code scanning. Remove handicap of handling scanner and shipments. Automated consolidated/bulk shipment/piece identification. Reducing costs of Security Services. Quality - improved service: Improved checkpoint availability: Commercial airlines which accounts for 30 million shipments/yr. Faster/earlier availability. Flexibility - new services.

12 DHL RFID today development model. Select the most widely used ID capture processes. Develop one device at a time. Move device into real world and stress test. Focus on developing devices for the toughest challenges first. Simulate real world at the developer and test. Maximize developer access at lowest cost. Assemble multiple proven devices into the real world and Pilot. Levelled Risk DHL & Others

13 LOGISTICS SERVICE PROVIDER Company performing logistics activities on behalf of a manufacturer or distributor. Depending on the complexity and the type of value-added operations carried out by the Logistics Service Provider, several categories can be defined: The traditional Logistics Service Providers who carry out physical logistics operations (transport and storage) and whose management system is limited to tracking shipments on behalf of the client company; The value-added Logistics Service Providers who add a certain number of services to the traditional package ranging from managing complex operational handling (co-manufacturing and co-packing), to management of administrative operations (billing and ordering) and information management (tracking-tracing, etc.); Logistics services integrators characterized by the quasi-absence of their own physical facilities. Their role is to integrate the services of different subcontracting companies (transport, storage, value-added operations, etc.) and to coordinate and control them through management of the associated information flows.

14 Logistics Industry Evolution First Generation (1970s s) Third Generation ( 2000 and beyond) Second Generation (1980s s) Online freight marketplaces Web-based 3PLs Increasing supply chain integration Non asset-based companies Asset-based companies increased service offerings Transportation / warehousing Freight forwarders / brokers Shipper s agents Broader more integrated services

15 First-party logistics,, 1PL First-party logistics provider (1PL) is a firm or an individual that needs to have cargo, freight, goods, produce or merchandise transported from a point A to a point B. The term first-party logistics provider stands both for the cargo sender and for the cargo receiver. A 1PL can be a manufacturer, trader, importer/exporter, wholesaler, retailer or distributor in the international commerce field. It can also be institutions such a government department or an individual or family removing from one place to another. Anyone having goods moved from their place of origin to their new place is considered to be firstparty logistics provider.

16 second-party logistics provider,, 2PL A second-party logistics provider (2PL) is an asset-based carrier, which actually owns the means of transportation. Typical 2PLs would be shipping lines which own, lease or charter their ships; airlines which own, lease or charter their planes and truck companies which own or lease their trucks

17 Third Party Logistics Third-party Logistics is simply the use of an outside company to perform all or part of the firm s materials management and product distribution function. -- Simchi-Levi (2000) A relationship between a shipper and third party which, compared with the basic services, has more customized offerings, encompasses a broad number of service functions and is characterized by a long-term, more mutually beneficial relationship -- Murphy & Poist (1998)

18 Third-Party Logistics (3PL): Definitions 3PLs are external suppliers that perform all or part of a company s logistics functions, including: Transportation Warehousing Distribution Financial services Terms contract logistics and outsourcing are sometimes used in place of 3PL.

19 Third Party Logistics In-house Operation IT support Shipper In-house Logistics Department Transportation Outsourced Operation Shipper Shipper Shipper Warehousing Others 3PL Transportation Warehousing IT support SC integration Others

20 Third-Party Logistics (3PL): Types of 3PL Providers Transportation-Based Warehouse/Distribution-Based Forwarder-Based Financial-Based Information-Based

21 Third-Party Logistics (3PL): Types of 3PL Providers Transportation-Based Services extend beyond transportation to offer a comprehensive set of logistics offerings. Leveraged 3PLs use assets of other firms. Nonleveraged 3PLs use assets belonging solely to the parent firm. Ryder, Schneider Logistics, FedEx Logistics, and UPS Logistics are examples of 3PLs.

22 Third-Party Logistics (3PL): Types of 3PL Providers Warehouse/Distribution-Based Many, but not all, have former warehouse and/or distribution experience. Transition to integrated logistics has been less complex than for the transportation based providers. DSC Logistics, USCO, Exel, Caterpillar Logistics, and IBM are examples of warehouse/distribution-based 3PLs.

23 Forwarder-Based Third-Party Logistics (3PL): Types of 3PL Providers Essentially very independent middlemen extending forwarder roles. Non-asset owners that capably provide a wide range of logistics services. AEI, Kuehne & Nagle, Fritz, Circle, C. H. Robinson, and the Hub Group are examples of forwarder-based 3PLs.

24 Financial-Based Third-Party Logistics (3PL): Types of 3PL Providers Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory. Cass Information Systems, CTC, GE Information Services, and FleetBoston are examples of financial-based 3PLs.

25 Information-Based Third-Party Logistics (3PL): Types of 3PL Providers Significant growth and development in this alternative category of Internet-based, business-to-business, electronic markets for transportation and logistics services. Transplace and Nistevo are examples of information-based 3PLs.

26 Why is it needed? Advantages ocost reduction ofocus on core competency oimproved efficiency, service and flexibility oindustry-specific application build-to-order systems and e-merchants Disadvantages oloss of control oimpact on in-house workforce

27 Range of Services provided by 3PL Complexity & Customization High Physical Services Low Low Physical Contract Logistics Services Dedicated contract carrier Dedicated warehousing Basic Services Common Carriage Public Warehousing Management Services Complexity & Customization Integrated Contract Logistics Integrated warehousing & transportation Integrated carrier management & transportation Management contract logistics Services Traffic Management Warehouse Management Import/export Management High Source: J.M. Africk & C.S. Calkins ( Transportation & Distribution, 1994)

28 Current State - Service Offerings Dedicated Contract Transportation / Transportation Procurement Inventory Management Logistics Management and Consulting Freight Audit and Bill Payment Customs Services Shipment Tracking and Tracing Reverse Logistics and Value-added Services

29 Current use of 3PL by industry Industry Percentage of 3PL use in different industries Computer Consumer Retail Chemical Medical Auto 82,2 75,9 71,1 61,4 56,2 53,8 Source "What's ahead for 3PLs Modern Materials Handling, April, 2000

30 Third-Party Logistics Research Study: Industry Details Outsourced logistics services include: Warehousing (73.7%) Outbound transportation (68.4%) Freight bill auditing/payment (61.4%) Inbound transportation (56.1%) Freight consolidation/distribution (40.4%) Cross docking (38.6%)

31 Figure PL User/Nonuser Experience,

32 Shippers Using More than Five 3PLs

33 Table 11-2 Third-Party Revenues Estimated at $56.4 Billion in 2000

34 Third-Party Logistics Research Study: Industry Details Reported problem areas: Service level commitments not realized. Strategic management skills lacking. Cost reduction goals not realized. Cost creep and price increases occurring. Improvements and achievements lacking. Control of outsourced functions diminished. Consultative, knowledge-based skills lacking. Technology capabilities not being delivered. Time and effort spent on logistics not reduced.

35 Emergence of Fourth Party Logistics Providers u Globality and Supply Chain Integration are increasing the functions of Logistics providers. This has lead to the emergence of consulting firms as fourth party logistics providers u 3PL have a larger, more efficient network of transportation & networking, but the 4PL have optimal combination of warehouse capabilities, transportation services and technology u Consultants as 4PLs are used to review bids made by 3PLs, and to align the business processes with the supply chain --especially critical in case of Global Logistics. u 4PLs have the advantage of being in sync with the rapid, enormous changes in Information Technology.

36 4PL 1990s-2000 Development & Role of 4PL Client Client Client Greater Functional Integration Broader Operational Autonomy 4PL Business Process Management 3PL IT Service Providers Outsourcing 1980s-1990s Client 3PL Insourcing 1970s-1980s Client Internal Logistics Operations Source: Andersen Consulting

37 4PL (i.e.

38 Fifth Party Logistics Fifth Party Logistics (5PL) is attributed to Logistics Service Providers who plan, organize and implement logistics solutions on behalf of a contracting party (in particular, information systems) by exploiting the appropriate technologies (conceptual level). The central ethos of 5PL is its commitment to collaboration and to obtaining a higher degree of resource utilisation in order to achieve savings and open up opportunities to secure the best possible solution at minimum cost/carbon etc.,

39 6, 7,8, PL The phrase 7PL was coined by the Value Logistics Group and is a concept describing the developing trend of 3PL and 4PL combined. Through this service, the client has one service provider that oversees the entire logistics chain. 7PL is the combination of 3PL and 4PL into one (3PL + 4PL = 7PL). One service provider can now provide a client with both 3PL and 4PL services with a complete 7PL solution to clients and can undertake turnkey projects for its clients where all services and activities are provided for under one roof. One contract, one bill. 7PL is a turnkey solution where instead of dealing with several people for various services like inbound, outbound and warehousing, clients now are required to deal with one person under the one contract, one bill concept. 7PL companies will be prime candidates for takeover by bigger players and play the role of service providers within the larger offer. Such consolidation will be seen in all areas from shipping, trucking, air cargo to couriers, ground handlers and IT services. Many others will drop out.

40 Niche Markets Online Logistics Providers Online Freight Marketplaces Spot market Auction and RFQ Exchange Meta-marketplaces Application Service Providers (ASPs) Purchasing Consolidation Market Infomediaries

41 Online Logistics Providers-Opportunity The Freight Transportation Industry is Ideally Suited e-commerce High Fragmentation of Shippers and Carriers Many Intermediaries Complex Supply Chains High Search Costs Significant Opportunities for Economies of Scale Several Models Emerging

42 ITS, UC Irvine

43 ITS, UC Irvine

44 ITS, UC Irvine

45 ITS, UC Irvine

46 ITS, UC Irvine

47 ITS, UC Irvine

48 ITS, UC Irvine

49 ITS, UC Irvine

50 ITS, UC Irvine

51 ITS, UC Irvine

52 ITS, UC Irvine

53 ITS, UC Irvine

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55 Dynamic Forces of Global Logistics The firms adopt different orientations with varying intensities due to the dynamic behavior of the global business environment. RESOURCES INFO USER

56 Global Logistics Orientation u Resource Oriented Logistics u Emphasis towards optimal use of resources -- capital, materials and people u Focuses on the relationship between the functional and the geographical Optimize Functional Geographical Resources

57 Global Logistics Orientation u Information Oriented Logistics u Emphasis towards optimal use of information. u Focuses on the relationship between the sectorial and the geographical dimensions Geographical Sectorial Optimal Performance

58 Global Logistics Orientation u User Oriented Logistics u Emphasis on the final customer. u Using all the supply chain partners to bring their expertise in order to best service the customer u User oriented focus brings about flexibility in the logistics channel Customer

59 Factors Pushing Global Logistics Technological Advances Emergence of Global Markets Political & Macroeconomic factors Global Cost Forces

60 u Global Markets Factors Pushing Global Logistics u Competition from foreign firms in local markets. u Incredible growth of demand in foreign markets. u Global presence used as competitive threat. u Change of priorities u Global markets growing faster due to technological advances u Products need to be introduced in all markets together. u State of the Art markets driven by customer preferences u Firms have to set up production in these areas to maintain their competitive profiles. E.g. Japan -M/c tools

61 Factors Pushing Global Logistics u Improvements in Technology u Communication faster, easier and cheaper. u Markets characterized by fewer producers and greater diversity in products u Shorter product life cycles u Technology advancement become global phenomenon u Firms have to start looking at international sources to tap technological services u Global competition forcing companies to locate more R&D and production units closer to the suppliers. u Joint ventures between firms to share technological info.

62 Factors Pushing Global Logistics u Global Costs Forces --Shift in Logistics costs u Shift in focus from direct labor costs u Global environment forcing companies to consider a trade off between labor costs, cost of start-up, fluctuation of currency, inventory costs, cost of quality management and training the local workers leading to island hopping strategy. u New Competitive priorities like speed, quality,customization, delivery reliability. u Production facilities are becoming more capital intensive u high technology industries u R & D costs

63 Factors Pushing Global Logistics u Political and Macroeconomic factors u Exchange rate fluctuations u Regional trade agreements ---NAFTA u Trade protection mechanisms u Tariff and non-tariff barriers u Technical Standards u Health regulations u Procurement policies

64 How is Global Logistics creating Change? u The management has to consider the Global economy u Service in the Industry becoming more important than Cost Saving u Logistics operations perceived more as Service Provider for cost minimization u Logistics activities no longer limited to moving products through the Supply Chain but as an Information Provider for the SC. u Companies moving away from Vertical Integration and towards Supply Chain Integration, with Logistics activities provided externally.

65 New concepts in Global Logistics Delocalization - practice of adding value to the product at different locations closer to the consumer. Modularization - practice of assembling a product using modules purchased from different sources Delayed Differentiation & postponement - Customization of the order after demand has been identified e.g: Labeling the products in the language of the countries that they have to be shipped to

66 Global Supply Chain HP Example IC MANUF. PRINTED CIRCUIT ASSM. & TEST VANCOUVER FINAL TEST & ASSM. VANCOUVER CUSTOMER SUPPLIERS WORLDWIDE PRINT MECH. MANUF. SUPPLIER ACCESSORIES DISTRIBUTION CENTRES WORLDWIDE